November trade deficit rises 10.4% as exports fall

Ed MorrisseyPosted at 9:25 am on January 13, 2012

Wonder how we could have gotten stuck at a 2.0% GDP growth rate in Q4? Novembers import and export numbers might tell a big part of the story. The trade deficit jumped more than ten percent as American exports fell, while import purchases driven by oil shot upward, while the year-on-year trade deficit rose almost 9%:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total November exports of $177.8 billion and imports of $225.6 billion resulted in a goods and services deficit of $47.8 billion, up from $43.3 billion in October, revised. November exports were $1.5 billion lessthan October exports of $179.4 billion. November imports were $2.9 billion more than October imports of $222.6 billion.

In November, the goods deficit increased $4.6 billion from October to $63.2 billion, and the services surplus increased $0.1 billion from October to $15.4 billion. Exports of goods decreased $1.5 billion to $126.6 billion, and imports of goods increased $3.1 billion to $189.7 billion. Exports of services were virtually unchanged at $51.3 billion, and imports of services decreased $0.2 billion to $35.9 billion.

The goods and services deficit increased $8.9 billion from November 2010 to November 2011. Exports were up $16.6 billion, or 10.3 percent, and imports were up $25.5 billion, or 12.7 percent.

Oil prices increases can explain the increased import numbers, but only in part. Industrial supplies imports increased $2.7 billion, for instance, the largest increase in the report, followed by automotive vehicles, parts, and engines, and then capital goods. That could be a sign of catching up from the supply-chain issues created by the tsunamis in Japan at the beginning of the year, but most of that should have already taken place.

What about the export numbers? Again, the big categories for decreases were the same categories where increases in imports took place. The market share for US firms in those businesses appear to have fallen rather than an increase in demand that US manufacturers couldn’t meet.

Reuters reports that this is the worst trade deficit report since June, when the quarterly GDP growth rate sunk to 1.3%:

The trade deficit widened in November to its largest in five months, suggesting imports weighed on economic growth more heavily than expected during the fourth quarter.

It was the biggest increase in imports since May, according to seasonally adjusted figures. The average price for imported oil rose to $102.50 per barrel, up 3.7 percent from October. The volume ofoil imports also rose.

Reuters tries to put a good spin on it, though:

Just as higher imports might be a sign of increasing consumer demand within the country, the drop in exports might reflect the recent cooling in the global economy.

It’s possibly true that we had such a big jump in consumer demand that it benefited both imports and domestic producers. Then again, the overall GDP for Q4 was … 2.0%, which doesn’t indicate that much of a boost in demand. It looks more like American manufacturers struggling with competitiveness abroad and at home, while importers gained some ground in a weak economy. That’s not the end of the world, and certainly this could turn around with the right economic policies in place — especially in energy production. However, our current administration isn’t taking those steps, so we can expect more mediocre-to-lousy news in the near future on the trade deficit and American competitiveness.